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While we await #USS's response to the consultation on the 2018 valuation, I'm starting a thread in which I state the limits within which their response will lie & provide my sense of the points within this range which would: 1/
(a) constitute a reasonable response which might lead to a settlement between employer & union or (b) constitute an unreasonable & intransigent response which (in part because of its unreasonableness & intransigence) would run a decent risk of provoking industrial action. 2/
At one limit lies a scenario of maximum intransigence in which #USS completely rejects Aon/UUK's contingent contribution (CC) proposal, does not replace it w/ another CC proposal, & imposes their upper bookend of 33.7% contributions. 3/
At the other limit lies a scenario of maximum accommodation in which #USS completely accepts the Aon/UUK CC proposal, w/ starting point of 29.2% contributions, 3 1% CC steps, 30% TP trigger of ≥ 1 step, & 2% trigger of all 3 steps. 4/
If #USS goes maximally intransigent & JNC does not decide otherwise, 33.7% contributions will be imposed from Oct 2019, split 65:35, so 23% employer, 10.7% member to retain current benefits of 1/75 CRB DB up to £58.5k w/ no match. 5/
This compares w/ the status quo (as of 1 April) of 28.3% contributions, split 19.5% employer, 8.8% member. 6/
On the maximally intransigent scenario, UUK will respond by calling for a cut to DB benefits rather than a rise in their contributions to 23%, which will be likely to provoke a strike. 7/
On the maximally accommodating scenario, in which #USS fully accepts the Aon/UUK proposal, UCU will call for a redistribution of any contribution increases so that they fall 100% on the employer, 0% on members. 8/
It appears from the wording of UCU's No Detriment policy 👇that increases will be measured against the current baseline of 8.8% member contributions. 9/
Employers will, however, insist on a 65:35 employer:member split of any increases arising from the 2018 valuation. 10/
Under the Aon/UUK proposal, member contributions would be certain to increase from the current 8.8% to 9.1% on October, 30% likely to rise by at least another 0.4% (to 9.5%) during the next 3 years, & 2% likely to rise to an upper limit of 10.4%. 11/
I believe that such increases would be sufficiently modest and improbable that they would not elicit the required 50% or greater turnout of UCU members on a postal ballot to go on strike in response. 12/
#USS will not, however, fully accept the Aon/UUK proposal. Whether their failure to do so provokes a strike will depend on both on how far they fall short &, importantly, the soundness of the reasons they offer for rejecting Aon/UUK. 13/
I don't think anyone expects #USS to embrace Aon/UUK's lower bookend of 29.2% rather than sticking to their own proposed lower bookend of 29.7%. Moreover, #USS has good grounds, which I sketch in Sec II of this blog 👇, to hold the line at 29.7%. 14/
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As Aon has written: "In our view, the Lower Bookend figure [of 29.7%] is in the spirit of the JEP report which noted that there were a number of paths the Trustee could adopt to reduce the contribution rate to below 30%." 15/
#USS's upper bookend figure of 33.7% is, however, much more vulnerable to challenge, since it involves indefensibly high deficit recovery contributions (DRCs) of 5%. See here👇for why this is indefensibly high. 16/
There is an unanswerable case to lower upper bookend DRCs by at least 1% even if not the full 1.5% that Aon/UUK has proposed and hence for lowering the upper bookend to at least 32.7%. 17/
As #USS makes clear in both of its recent consultation documents, the upper bookend also provides the upper limit of contribution increases under the lower bookend plus CCs. 18/
Aon/UUK also provide an unanswerable case that the chances of one more CC increase should be less than 33%, given the 67% level of prudence of the discount rate. 19/
Hence, it would be a sign of unreasonable intransigence if #USS rejects Aon/UUK's 30% trigger of any contribution increase with a trigger that has a greater than c. 30% of being set off. 20/
It might, however, be possible, without lapsing into unreasonable intransigence, for #USS to reject Aon/UUK's proposal of three 1% steps to the upper bookend with fewer, larger steps (e.g., two 1.5% steps) to that same upper bookend. 21/
So I think the following is as far as #USS could go in rejecting Aon/UUK without lapsing into unreasonable intransigence: 22/
(c) Two 1.5% steps to upper bookend, w/ 30% of one or more steps being triggered, & a much lower probability (c. 10%) of the 2nd step being triggered. See Aon chart for rationale for 10% & 30%👇. 24/ 
If #USS imposes such a valuation rather than one that is unreasonable & intransigent & employers continue to call for a 65:35 split of any contribution increases, then: 25/
Member contributions would be certain to increase, in October, from the current 8.8% to 9.3%, 30% likely to increase to at least 9.8% thereafter, & 10% likely to increase to a maximum of 10.3%. 26/
While difficult, such member contribution increases, plus the accompanying larger employer increases, would, I think, make a settlement possible that preserves the current level of pension benefits. 27/
